IAAHS Colloquium Dresden, Germany The Current State of the Long - - PowerPoint PPT Presentation

The Current State of the Long Term Care The Current State of the Long Term Care Insurance Market in the U.S. Insurance Market in the U.S.

Allen J. Schmitz, F.S.A., Consulting Actuary

April 29, 2004

IAAHS Colloquium – Dresden, Germany

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THIS SESSION WILL COVER:

Brief History of LTC financing in the U.S. Role of public and private programs Demographic and Cost Information LTC Insurance Products / Trends LTC Insurance Risks LTC Insurance Market Trends

Session Overview Session Overview

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Prior to 1800’s:

Family – Old age security meant having

children or wealth

1800’s:

Poorhouse – Early welfare system

1900-1940:

Old-Age Homes, Great Depression,

Social Security Act

U.S. LTC History U.S. LTC History

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1940-1970:

Government becomes primary payer for

nursing home care

Medicare and Medicaid created and costs

explode

1970-Today:

Medicare and Medicaid still dominant Entitlement mentality LTC financing crisis is becoming apparent

U.S. LTC History U.S. LTC History

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PUBLIC Medicare

• Limited home care based on need
• Nursing home care up to 100 days
• Funded by payroll tax

Medicaid

• For low income individuals
• Funded by general taxation

U.S. LTC U.S. LTC – – Public & Private Roles Public & Private Roles

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PRIVATE Insurance - Sales growth

• Low penetration
• Consumer education

Self Fund

• Costly / emotional burden

Other

• Continuing care retirement

communities (CCRCs)

U.S. LTC U.S. LTC – – Public & Private Roles Public & Private Roles

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Other Public 3 Medicare 14 Other Private 4 Private Insurance 11 Out-of-Pocket 23 Medicaid 45

Public Payers

COST INFORMATION

Note: Amounts do not include unpaid care provided by family member or other informal caregivers or expenditures for nursing home and home health services provided by hospital-based entities. Source: GAO analysis of 2000 data from the Centers for Medicare and Medicaid Services and The MEDSTAT Group

U.S. LTC U.S. LTC – – Public & Private Roles Public & Private Roles

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30.5 4.3 47 6.8 62.9 14.3

10 20 30 40 50 60 70 80

Number (in millions)

2000 2020 2040

85 and older 65-84 years old

U.S. LTC U.S. LTC – – Demographics Demographics

ELDERLY POPULATION

Source: Bureau of the Census, “Projections of the Total Resident Population by 5-Year Age Groups and Sex With Special Age Categories: Middle Series”, selected years 2000 to 2040 (Jan. 2000).

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0.33 1.05 1.46 0.57 1.26 2.04 0.65 1.98 2.69

1 2 3 4 5 6

N u m b e r ( i n m i l l i

• n

s )

2000 2020 2030

85 and over 75-84 years old 65-74 years old

U.S. LTC U.S. LTC – – Demographics Demographics

NURSING HOME POPULATION

Source: American Council of Life Insurance

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U.S. LTC U.S. LTC – – Demographics Demographics

SELECT COUNTRIES PERCENTAGE OF POPULATION AGES 60+

Source: U.S. Bureau of the Census (1996).

22.3 22.3 21.9 20.9 20.9 20.5 20.3 19.6 18.1 17.3 16.5 5 10 15 20 25

Italy Hungary Czech Republic Uruguay United States Greece Sweden Japan Germany United Kingdom France

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U.S. LTC U.S. LTC – – Demographics Demographics

SELECT COUNTRIES POPULATION AGES 80+ AS A PERCENTAGE OF TOTAL POPULATION

3.8% 5.2% 7.8% 7.6% 7.2% 6.1% 4.5% 3.2% 4.0% 3.4% 4.0% 3.6% 3.7% 3.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

U.S. UK Japan Italy Germany France Canada

1998 2020

Source: U.S. Bureau of the Census, International Database (1998).

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PRODUCTS:

Guaranteed Renewable Level Premium for Life of Policy Benefit Trigger

– ADL (Activity of Daily Living) – CI (Cognitive Impairment)

Nursing Home, Assisted Living,

Home Health Care

Integrated Benefit Designs

LTC Insurance LTC Insurance – – Products/Trends Products/Trends

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PRODUCTS: (continued)

Benefit Periods / Lifetime Maximum Elimination Periods Inflation Protection Tax-Qualified vs. Non-Tax-Qualified

– 90-Day Certification – Medical Necessity Trigger – Tax Reserves – Treatment of Benefits and Premiums

LTC Insurance LTC Insurance – – Products/Trends Products/Trends

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TRENDS:

Group vs. Individual Younger Issue Ages Combination Products New Benefit Features

– “Shared Care” – Disability Structure Regulatory Considerations

LTC Insurance LTC Insurance – – Products/Trends Products/Trends

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815 1,130 1,550 1,930 2,430 2,930 3,417 3,837 4,351 4,960 5,542 6080 6,831 7,529 8,261

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

LTC LTC – – U.S. Market Trends U.S. Market Trends

LTC POLICIES SOLD 1987-2001 (in 000’s)

Source: HIAA LTC Insurance Market Surveys

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75 105 118 143 135 135 118 121 125 120 119 121 124 137

20 40 60 80 100 120 140 160

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000- 2001

COMPANIES SELLING LTC 1987-2001

Source: HIAA LTC Insurance Market Surveys

LTC LTC – – U.S. Market Trends U.S. Market Trends

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Source: HIAA LTC Insurance Market Surveys

66 NA 5% 13%

Long-Term Care as Part

• f a Life

Insurance Policy

46 24% 16% 10%

Employer- Sponsored

62 76% 80% 81%

Individual and Group Association

Average Age of Buyer in 2001 Percentage

• f Policies

Sold in 2001

(n=732,000)

Percentage

• f Policies

Sold as of 12/01

(n=8.26 million)

Percentage of Companies*

(n=137)

Long-Term Care Product

* Totals more than 100% because some companies sell in more than one type of market.

LTC LTC – – U.S. Market Trends U.S. Market Trends

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Source: HIAA LTC Insurance Market Surveys

COVERAGE AMOUNT: $100 daily benefit amount, 4 years of coverage, and 20-day elimination period

$8,883 $6,379 $7,588 $5,265 79 $2,988 $1,554 $2,273 $1,263 65 $1,369 $642 $1,009 $510 50 $1,001 $498 $834 $396 40

COVERAGE AMOUNT: $150 daily benefit amount, 4 years of coverage, and 90-day elimination period

$7,002 $5,087 $5,821 $4,180 79 $2,261 $1,219 $1,726 $996 65 $1,022 $502 $849 $401 50 $786 $387 $641 $310 40

With IP & NFB With Non-forfeiture Benefit (NFB) With 5% Compounded Inflation Protection (IP) Base Age

* Eleven sellers were identified as having sold 80% of all individuals and group association long-term care insurance policies in 2001.

LTC LTC – – U.S. Market Trends U.S. Market Trends

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15+% 10-14% 6-9% 1-5%

Source: HIAA LTC Insurance Market Surveys

STATE-BY-STATE LTC MARKET PENETRATION

LTC LTC – – U.S. Market Trends U.S. Market Trends

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U.S. LTC U.S. LTC – – Insurance Market Trends Insurance Market Trends

10,595,246 81% 19,177,395 State Life 13 10,671,632 15,900,731 26% 20,105,207 Mass Mutual 12 18,231,929 25,879,692

• 21%

20,487,624 Mutual of Omaha 11 20,815,490 29,752,236

• 21%

23,388,681 State Farm 10 17,938,517 26,869,758 10% 29,456,242 Prudential 9

• 57%

66%

• 31%

36%

• 22%
• 20%

51%

• 7%

Growth 62,828,000 75,927,000 33,000,000 CNA Insurance 8 17,564,000 24,449,000 40,593,030 MetLife 7 54,711,303 64,369,137 44,422,233 UNUM Life of America 6 24,624,404 35,040,699 47,789,203 Lincoln Benefit 5 62,680,000 63,185,000 49,220,000 Aegon 4 98,320,220 78,700,000 63,302,207 Conseco Companies 3 99,724,645 131,093,179 197,678,563 John Hancock Mutual 2 $242,584,666 $248,444,000 $230,399,416 GE Capital 1 2001 Sales 2002 Sales 2003 Sales Company Rank

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U.S. LTC U.S. LTC – – Insurance Market Trends Insurance Market Trends

$14,234,341 $17,217,040 8% $18,635,099 New York Life 14 9,102,378 12,925,819 31% 16,918,000 Northwestern Mutual 15 41,682,858 41,397,955

• 72%

11,797,672 Allianz Life 16 6,430,000 8,050,000 16% 9,314,000 MedAmerica 17 932,121,668 1,002,185,925

• 8%

917,827,073 Grand Total

• 49%
• 91%

7%

• 17%
• 82%

4%

• 26%

9% Growth 3,745,672 3,150,000 1,600,000 Combined of America 25 28,429,023 25,377,677 2,295,176 IDS Life 24 3,846,334 3,461,701 3,710,179 Knights of Columbus 23 1,658,777 4,943,155 4,124,855 Guarantee Trust Life 22 30,250,898 28,084,503 5,158,779 Thrivent 21 9,299,394 6,728,188 7,003,608 TIAA 20 47,155,876 12,110,000 8,950,498 Penn Treaty 19 5,591,311 8,534,209 9,299,406 Equitable 18 2001 Sales 2002 Sales 2003 Sales Company Rank

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Pricing Risk:

Morbidity

– Limited Insured Data – “Long Tail” Risk – Home Health Care versus Nursing Home Persistency Investment Income Expenses Profit Levels

U.S. LTC U.S. LTC – – Insurance Risks Insurance Risks

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Regulatory Environment:

Federal Government Involvement in

Financing of LTC

State Insurance Departments Rate Stabilization Measures

U.S. LTC U.S. LTC – – Insurance Risks Insurance Risks

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Underwriting and Claims Adjudication:

Cognitive Screening “Lifestyle” Underwriting Telephone Interview and Medical Records Care Management

U.S. LTC U.S. LTC – – Insurance Risks Insurance Risks

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Financing Options for Individuals:

Public Financing

– Quality / Financing Issues

Self Insure / Informal Care

– Cost – Emotional Burden / Relationship Stress

Private LTC Insurance

– Prefunding – Education

U.S. U.S. – – Future of LTC Insurance Future of LTC Insurance